Friday, August 26, 2005

The economy is "flexible" like my back is "flexible" when you put your boot on it 

The view from the top:

[GREENSPAN] Our most valued policy asset: the increased flexibility of our economy, which has fostered our extraordinary resilience to shocks."
(via AP)

The view from the bottom:

he administration and some political commentators seem genuinely puzzled by polls showing that Americans are unhappy about the economy. After all, they point out, numbers like the growth rate of G.D.P. look pretty good. So why aren't people cheering?

About employment: it's true that the economy finally started adding jobs two years ago. But although many people say "four million jobs in the last two years" reverently, as if it were an amazing achievement, it's actually a rise of about 3 percent, not much faster than the growth of the working-age population over the same period. And recent job growth would have been considered subpar in the past: employment grew more slowly during the best two years of the Bush administration than in any two years during the Clinton administration.

It's also true that the unemployment rate looks fairly low by historical standards. But other measures of the job situation, like the average of weekly hours worked (which remains low), and the average duration of unemployment (which remains high), suggest that the demand for labor is still weak compared with the supply.

Employers certainly aren't having trouble finding workers. When Wal-Mart announced that it was hiring at a new store in Northern California, where the unemployment rate is close to the national average, about 11,000 people showed up to apply for 400 jobs.

Because employers don't have to raise wages to get workers, wages are lagging behind the cost of living. According to Labor Department statistics, the purchasing power of an average nonsupervisory worker's wage has fallen about 1.5 percent since the summer of 2003. And this may understate the pressure on many families: the cost of living has risen sharply for those whose work or family situation requires buying a lot of gasoline.

Some commentators dismiss concerns about gasoline prices, because those prices are still below previous peaks when you adjust for inflation. But that misses the point: Americans bought cars and made decisions about where to live when gas was $1.50 or less per gallon, and now suddenly find themselves paying $2.60 or more. That's a rude shock, which I estimate raises the typical family's expenses by more than $900 a year.

You may ask where economic growth is going, if it isn't showing up in wages. That's easy to answer: it's going to corporate profits, to rising health care costs and to a surge in the salaries and other compensation of executives. (Forbes reports that the combined compensation of the chief executives of America's 500 largest companies rose 54 percent last year.)

(Krugman via the New York Times)

11,000 people for 400 jobs at a Walmart? That's cold...

The Wecovery: Call it a dildo, 'cause we got fucked.

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